Over the past five trading sessions local shares moved lower despite mostly strong leads from offshore. In the US, the S&P 500 and Dow Jones started the week at record highs amid signs of strengthening housing and employment markets.

“As the US recovery continues, how the Federal Reserve manages a reduction in stimulus, which is currently fuelling global liquidity, will be the most important global macro-economic theme over the coming year," Magellan Asset Management portfolio manager
Dom Giuliano
said.

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Maple-Brown Abbott chief investment officer
Garth Rossler
said: “Unprecedented levels of central bank stimulus means navigating the withdrawal process is uncharted territory so it is inevitable there will be some volatility. The Fed’s strategy of hyper-communication will be helpful in mitigating the risk of the market getting spooked but is no guarantee."

Mr Giuliano said: “Because the Fed has said its timing will be data dependent, they are unlikely to surprise markets with a premature withdrawal of stimulus."

A reduction in US stimulus is expected to push its currency higher, weakening the Aussie dollar. At ­Friday’s local close the dollar was buying US90.89¢, down from US91.77¢ at the previous week’s close.

“A depreciating currency is providing some support for local equities, however this was widely expected and largely built in to valuations," Mr Rossler said.

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Energy was the worst-performing sector over the week, down 2.5 per cent as the crude oil price dipped US19¢ to $US110.86 a barrel. Australia’s biggest oil producer, Woodside ­Petroleum, lost 2.2 per cent to $37.40 and other major players Santos, Oil Search and Origin Energy also finished lower.

The mining sector was mostly lower despite the spot price for iron ore, landed in China, only dipping 10¢ to $US136.40 a tonne.

On Wednesday a Bureau of Resources and Energy Economics report said new mining project approvals are at a decade low and predicted more major projects will be shelved or delayed over the next three years.

Australian Bureau of Statistics figures, released on Thursday, showed an unexpected rise in business investment during the September quarter, while confirming fewer mining companies plan new investments this quarter.

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The miners

Index heavyweight BHP Billiton dropped 1.2 per cent to $37.39 over the week. Rio Tinto gained 1.2 per cent to $66.06 as investors endorsed a decision to close its loss-making Gove alumina plant. The closure was good news for Alumina, which jumped 7.3 per cent to $1.02. Also bucking the downward trend in the mining sector was Whitehaven Coal, up 6.8 per cent to $1.62.

Oceanagold surged 8.8 per cent to $1.80 after finalising a takeover of Toronto-listed gold producer Pacific Rim Mining on Thursday. Mining services business Forge Group plummeted 82 per cent to 75¢, after emerging from a three-week trading halt to reveal a $127 million write-down.

But gold stocks were mostly lower as the spot price for the precious metal dropped to $US1242.78 an ounce at Friday’s local close. Australia’s biggest goldminer, Newcrest Mining, lost 9.9 per cent to $7.69.

“The mining companies probably still have more cost-cutting initiatives ahead so the outlook is very unclear for the mining services sector," Mr Rossler said.

Banks stocks were the strongest part of the market over the week as the big four closed higher. Commonwealth Bank of Australia rose 1.7 per cent to $77.82 and National ­Australia Bank added 1.9 per cent to $34.58. Westpac gained 1.2 per cent to $32.88 and ANZ rose 0.7 per cent at $31.90.

In the food and liquor sector, ­Wesfarmers, owner of Coles, fell 2.6 per cent at $42.92 and ­Woolworths shed 0.2 per cent at $33.69. Telstra Corporation was unchanged at $5.06.

Information technology was the best-performing sector up 1.2 per cent as online jobs advertiser SEEK climbed 9.1 per cent to $13.37 after revealing plans to divest two of its businesses, and Computershare added 1.1 per cent to $10.89.

“One of the themes of annual meeting season has been a soft outlook for first half 2014 earnings expressed by some of the less cyclical companies. Another interesting development has been the significant increase in the share prices of many cyclical stocks, such as in the retail and transport sectors, having risen on the expectation of future earnings growth. We are hoping to see that growth come through over the next 12 months, otherwise some of these stocks could be vulnerable," Mr Rossler said.